Fitch Rates Texas Children’s Series 2015 Rev Bonds ‘AA’; Stable Outlook
The Rating Outlook is Stable.
The series 2015 bonds will be structured as approximately
SECURITY
The bonds are a general and unsecured obligation, which is considered weak but expected for the rating level.
KEY RATING DRIVERS
LARGE INTEGRATED PEDIATRIC PROVIDER: Texas Children's is the largest freestanding children's hospital in the country and has significantly grown its revenue base through an ambitious capital plan (Vision 2010) that added capacity, invested in research, and expanded into women's services. The organization has broadened its geographic footprint and developed an additional campus (West campus) and outpatient facilities (clinics, urgent care, medical homes) in the greater
CONTINUED CAPITAL EXPANSION: Texas Children's successfully completed its Vision 2010 capital plan in 2012 with a total of
SOLID OPERATING PERFORMANCE: After weaker operating performance in fiscal 2012 due to the initial expenses of the added capacity, operating performance rebounded in fiscal 2013 and 2014 and improved to a 5.3% operating margin through the five months ended
STRONG BALANCE SHEET: Texas Children's balance sheet is strong with
MODERATE DEBT BURDEN: Despite the additional debt issuance,
HIGH EXPOSURE TO MEDICAID: Not unlike other children's hospitals,
RATING SENSITIVITES
EXECUTION OF CAPITAL PLAN: Fitch expects Texas Children's to successfully execute this next phase of significant spend due to its track record and maintain a financial profile consistent for its rating level.
CREDIT PROFILE
Located in
Plan of Finance
The series 2015 issue will fund
Proforma variable rate exposure will all be at an indexed floating rate of either SIFMA or LIBOR. There are two existing direct bank loans (series 2008-1 -BBVA;
Integrated Delivery System
Fitch views Texas Children's market position favorably as it is the leading pediatric provider in a growing service area with an aligned medical staff and a health plan that has a large share of the
TCH's medical staff is comprised of both the BCOM pediatric and Ob/Gyn faculty as well as private physicians. The private physicians include two OB/GYN physician practices (Texas Children's Women's Specialists) that accounted for a large portion of St. Luke's OB/GYN volume. In addition, TCH employs almost 250 primary care pediatricians in 49 clinical sites throughout the service area (
Significant Capital Spending
Vision 2010, a
The fiscal 2015-2019 capital plan totals
The sources of funds include
Strong Liquidity
One of Texas Children's main credit strengths is its strong liquidity. Cash and investments have exhibited solid growth after the period of heavy capital spending on Vision 2010. Total unrestricted cash and investments were
Solid Operating Performance
After weaker performance in fiscal 2012, Texas Children's had a 2.8% operating margin in fiscal 2013, 3.1% operating margin in fiscal 2014 and 5.3% operating margin through the five months ended
Revenue increased 8.4% in fiscal 2014 and of the
There is a
Manageable Debt Burden
Proforma MADS is
Disclosure
Fitch notes that Texas Children's disclosure practices are very thorough and timely with annual and quarterly information posted on EMMA.
Outstanding Debt:
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Additional information is available at 'www.fitchratings.com'.
--'Revenue-Supported Rating Criteria', dated
--'U.S. Nonprofit Hospitals and Health Systems Rating Criteria', dated
Revenue-Supported Rating Criteria
http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=750012
U.S. Nonprofit Hospitals and Health Systems Rating Criteria
http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=746860
Additional Disclosure
Solicitation Status
http://www.fitchratings.com/gws/en/disclosure/solicitation?pr_id=984099
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